TowerGroup recently published a research note on GIS thatexamines three significant areas where GIS is offering carriersgreat benefits. I think underwriting [is a general priority ofGIS], but [GIS] also is very powerful in terms of disasters andcatastrophes in managing your claims adjusters out there, assertsSmallwood. Thats where a lot of companies were using thistechnology with the hurricanes in Florida. Flood insurance,particularly identifying flood plain areas, is the third.
[Insurers] were able to send their claims adjusters to the placesthat got hit the hardest [following the Florida hurricanes of2004], adds Matthew Macauley, a research associate for TowerGroup.They had their claims adjusters both on wireless networks and withGIS.

The technology allows claims ad-justers to locate a claimantsproperty even if there is no street sign (or even a building) tomark the property. As Smallwood states in the research note, Whilethe value to an insurance carrier in terms of efficiency ofresource deployment can be measured, the goodwill and positivecustomer service generated by the use of location-basedintelligence can be worth much more.

The TowerGroup study lists three areas for underwriting whereGIS can serve as a valuable tool: geographic factors in risk,rating territory validation and correction, and personalized riskassessment. The technology will allow underwriters to see visuallya territory with their map technology, explains Smallwood.[Insurers] can do it on a new-business and a policy-by-policybasis. It also allows them to take on a portfolio managementperspectiveable to see their books of business. Lets say on thecommercial side, you want to take on a new mall in a Florida area,you can look at your book of business to see how exposed youare.

Macauley believes the technology permits insurers to break downthe risk. Instead of saying this city falls under this code, youcan say this mile of this city falls under this code. And the nextstreet over is different because it is farther away from firehydrants or whatever the case may be, he says.

One industry trend that relates to underwriting involves datavalidation, notes Smallwood. [GIS] brings editing and datavalidation closer to the submission of the application, she says.This software will allow the whole validation of the location,which becomes very critical in terms of applying the right rates.What were hearing is that looking at books of business and makingsure the right rates are being used can help increase premiumssignificantly.

The most famous use of one form of GIS, unfortunately, didntwork out. Progressive Insurance may have been ahead of its time intesting automobile coverage with a global positioning system (GPS)in 2001. Macauley believes the reason the Progressive program didnttake off was because the insurer required consumers to buy the GPScomponent themselves. But, Smallwood adds, many automakersautomatically are putting the devices in cars today withoutactivating them. Instead of being a penalty, I think insurers arelooking at [using GPS] to be a rewarda way of reducing premiumsinstead of increasing them, she says. It also gives insurancecarriers a baseline, according to the data they get, of how peoplein a certain class drive, which breaks it down better for [thecarriers], says Macauley.

Although Smallwood contends the market for GIS is increasing,the technology has yet to reach wide adoption as a strategicsolution for insurers. It may be its a technology that enables theorganization of many processes, she suggests, rather than a largeinitial savings on a few projects.

ROBERT REGIS HYLE